How to rectify error in your credit report

Credit score is given to you based on your ability to repay a loan. If your score is above 750, it is considered good. Anything below that is bad. Photo: iStockphoto

Did you recently check your credit report and realize that your credit score is very low? If you haven’t paid you loans on time or if you have defaulted on your credit card payment, this is bound to happen. But what if it is an error? Or what if you were not aware about a credit card overdue amount that you had years ago?

In 2003-06, several banks sold credit cards without checking eligibility. “People who didn’t want a card also got it. In the first year, the credit card was offered for free. Annual charges were applied from the second year. As there was no awareness about credit score, people didn’t pay attention. They didn’t know they should call the bank and say they don’t want it. Today, the same people have a red flag on their credit report,” said Hrushikesh Mehta, vice-president and head, direct-to-consumer interactive, TransUnion Cibil Ltd.

If you are one of those who have a low credit score because of a default on a credit product you were not aware of, we tell you how to rectify it. Before that, let’s understand the term.

What is it?

Credit score is given to you based on your ability to repay a loan. For instance, if you have a car loan, personal loan or a credit card and you make your payment on time, you will have a healthy credit score. If you don’t pay on time or default, you will get a bad score. There are four credit bureaus in the country that give credit reports and scores. Usually, it is a three-digit number. If your score is above 750, it is considered good. Anything below that is bad. A good score will help you get loans easily. You will also have a good chance to get credit at cheaper rates.

How to tackle dispute?

If you have not repaid your loan on time, low score is bound to happen. But if there is an error, you have the right to correct it. Firstly, you need to access your credit report. “Credit information is now available for free in most places. The best thing to do is to get your credit report,” said Mehta. If you find there is a credit card overdue for a card you never used, you need to rectify it.

There are two ways to do it—pay it or raise a dispute. “The best thing is to pay. Some of them are genuine mistakes or oversights. If it a 2004-2006 dispute, the bank might have sold your credit card portfolio to an asset restructuring company. The fastest way is to pay and settle the issue with the ARC. Simultaneously, raise a dispute with the bureau and we will follow up,” said Mehta.

How to get it waived?

Experts say banks usually waive the charges if you write to them. “The simplest thing to do is to write to the parent bank—the bank that has sold the portfolio to the ARC. If it is Rs3,000-Rs5,000, most banks will speak to the ARC and get it rectified. If they don’t do it, the customer will have to pay. A fee is a liability. There is no getting away from it,” said Arun Ramamurthy, founder, Credit Sudhaar.

But if you are a victim of misselling, you can get it corrected without paying anything, provided you prove it. “If a credit card has been mis-sold, the onus is on the customer to prove it. Most often, the customer would have signed a document where the fee is written, but haven’t read it. Misselling is tough to prove. As a customer, you can ask for a copy of the document that you have signed. If the bank doesn’t furnish it, they need to rectify it. If you are not satisfied with your bank’s response, you can approach the banking ombusdsman,” said Ramamurthy.

If you have never used the card and a fee has been charged, you don’t have to pay for it. “A genuine dispute where the customer has never used the card is easier to resolve,” said Ramamurthy.